Teenagers May Get Safer Card Purchasing Experience From Prepaid Debit Cards

Sooner or later, parents are going to have to learn to trust their teenagers to look after themselves as they grow older. This is especially true when it comes to credit cards and teenagers.

A parent giving a teenager a credit card is a nervous wreck. When it comes to spending money, teenagers are not exactly models of discipline and self-control. Credit cards, being what they are, could easily lead a teenager to financial disaster if a parent does not keep an eye on the teenager’s purchases. Keeping a constant eye on a teenager’s buying habits is quite a challenge, however. A better alternative is a prepaid debit card.

A prepaid debit card functions similarly to a regular debit card, except that it is linked to the checking or savings account of an individual who can set the amount available in the debit card. The teenager gets a debit card to use for purchases while the parent gets to have power over how the teenager uses his or her debit card. A prepaid debit card will not allow the card holder to spend more than the amount credited on the debit card.

Parents can also keep track of what the teenager is buying. Also, parents not only have the power to limit the amount available in the debit card, they also get to impose control on where the debit card can be used. This is a very important perk for the parent. By being able to control where the debit card can be used, parents can steer their teenagers away from wasteful and potentially harmful purchases such as for tobacco or liquor.

Bankrate.com financial analyst, Greg McBride says that using prepaid debit cards is like “having a governor on the gas pedal. You put limits on how fast they can go”.

Many financial institutions are also seeing the potential of prepaid or “reloadable” debit cards. Several banks are already introducing a number of card lines specifically targeted at exploring this particular market. National City, Wachovia and U.S. Bancorp are already offering the Buxx card of Visa. American Express is also offering its own prepaid debit card program. Even online payment company PayPal offers a similar service online where a teenager’s account can be linked to a parent’s PayPal account.

Prepaid debit cards may just be the tool that parents can effectively use to teach their teenagers financial self-discipline. However, there are risks involved as well. While these cards are offering a lot to teenagers, it can also effectively demolish their financial future if they are not careful in using them. Like any regular card, prepaid debit cards also have fees and penalties for when they are misused. To keep from getting hit with these fees, holders of prepaid debit cards should make it their responsibility to read the fine print in the agreement and stick.

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